Category Archives: Australian wine

Click on the image above to view a video of my recent talk on “Australia on the Global Stage” at Savour Australia 2013, the international gathering designed to re-launch Brand Australia to the world market.

Unfortunately you can’t see the slides that I used to illustrate my talk, but I think you will get a good idea of what the audience experienced. I received lots of positive feedback — I guess most people were surprised that an economist could be interesting at 9 am! Who knew?

I’m still travelling in Australia (Tasmania at the moment), but I’ll file a series of reports on the conference once I’m back in the office. In the meantime, enjoy the video of my talk and check out the other presentations.

>>><<<

Come back next week for the final report in the three-part series on wine in China.

“Modified rapture” is a line from Gilbert and Sullivan’s comic opera The Mikado. The dialogue as originally written was “Rapture!” but the actor who played Nanki-Poo was apparently a little too enthusiastic about it during rehearsals and Gilbert kept unsuccessfully asking him to tone it down. (You will understand why the rapture was incomplete if you view the YouTube video above.)

Finally, in complete frustration, Gilbert barked, “Modified rapture!” as a stage direction. And that’s exactly what the actor said, taking it literally as a text revision. Modified rapture, indeed! And it became a permanent part of this entertaining scene.

Dutch Disease Dilemna

Modified rapture – that’s my reaction to the good news about the Australian dollar (AUD). The Australian wine industry has suffered mightily from the “Dutch Disease,” which is what happens when a boom in one sector of the economy causes an over-valued currency that makes other sectors less competitive.

Exports to China, especially mineral exports, have been the boom sector and they have pushed the Australian dollar to incredible highs relative to the U.S. dollar. This has created a dilemma – pass the foreign exchange costs along to foreign buyers and you risk losing sales. Absorb the foreign exchange impact and margins shrink and sometimes dip into the red.

Rapture: the short term view

The over-valued Aussie dollar has affected all segments of the Australian wine industry, but bulk wine sales have been perhaps the most impacted because international competition is so fierce for commodity wines. Bulk wine sales account for about 45% of New World wine exports, so lots of business (and grower incomes) hang in the balance when the exchange rate shifts by even a penny or two.

Good News: A Short Sharp Shock

So the recent fall in the Australian dollar as shown above must be greeted with joy by Australian growers and producers. Although it was expected that the AUD would depreciate eventually, I’m not sure anyone would have predicted such a “short sharp shock” (to use another Gilbert and Sullivan line).

What caused the change? Well, Australians might say that it hardly matters – good news is good news. But good news doesn’t always last as the graph below indicates. This isn’t the first time that the AUD has tumbled and we can’t be entirely sure that it will not rebound (hence my “modified” description). And although the recent trend is welcome it must be noted that the AUD is a long way from its value back in early 2009, when it was even cheaper relative to the dollar than the 85-cent valuation that one analysis has predicted.

Modified rapture: the longer view

The AUD Trifecta

As I see it, the sudden shift is the result of a trifecta of effects. The first and most important is the slowing of the Chinese economy, with the resultant decrease in demand for Australian minerals. That’s one. The second is the shift in Japanese monetary policy. Abenomics, as it is called, is pumping up Japan’s money supply in an attempt to jump-start the economy.

This has driven down the yen’s value, which encourages some investors to repatriate funds previously placed abroad to take advantage of the fact that each host country Australian dollar (for example) now yields a larger home country yen profit. A good time to cash in your chips and bring your money home.

Finally, the U.S. Federal Reserve has announced that it is “tapering” its expansionary monetary policy, which has boosted U.S. interest rates and perhaps caused some “carry trade” international investment to shift to the U.S. from other countries (like Australia, for example).

So the result is good news and I think it might last, but it is important to realize that the trend could be reversed if China’s growth rate picks up (as most people hope it will) or if U.S. and Japanese monetary polices change dramatically. Fingers crossed — there is a lot on the line!

>>><<<

Foreign exchange historical tables are from Oanda.com.
I couldn’t resist adding this classic Mikado video — the “short sharp shock” appears at about the two minute mark. Enjoy.

The conventional wisdom disagrees, but I say what’s wrong with judging a book by its cover? People judge wines by their labels all the time!

OK, so maybe it is a bad idea as a general rule, but I encourage you to make an exception for my next book, Extreme Wine, which is sailing smoothly towards its October 2013 release date.

Check out the recently-finalized cover– pretty cool, huh? Hope readers will think that the book is as good as the cover that embraces it!

Best Sellers Are Made Not Born?

Since Wines Wars was such a success, we naturally have high hopes for Extreme Wine. Wine Wars in its three editions (hardcover, paperback and eBook) has consistently appeared in Amazon.com’s various specialized best seller lists (such as the top 100 globalization books, for example), but didn’t bust through to the really big New York Times kind of league tables. Tough to break into the really big leagues, I guess.

In reading about how the best seller lists work, I discovered that there are some techniques to “game” the best-seller rating system. Some unscrupulous authors and publishers, for example, have apparently purchased large volumes of their own books all at once — creating the sort of sales bump that pushes a book onto the big time lists — only to cancel the order or return the books after ratings have appeared. Mission accomplished, so to speak, and a phantom best-seller created.

Clever, I suppose. But not very ethical. I would never do anything like that (even if my credit card had enough head room to allow me to place such a big order).

A Not Entirely Unethical Experiment

But there’s another technique that is also strategic but not entirely unethical. It involves Amazon.com pre-orders. Apparently all of the pre-orders on Amazon are processed together on the day that a book is released — giving that same sales bump as the phantom strategy, but based upon actual orders, not fake ones. I guess that’s why some of my author friends encourage their readers to pre-order.

I wonder if it would work for Extreme Wine? If you’d like to participate in an experiment to find out, click here to visit the Amazon.com page for Extreme Wine where you can pre-order the hardback (you’ll have to wait for the Kindle version). It’s just a social media experiment, you see, not really Shameless Self-Promotion as you are probably thinking!

Speaking of Shameless Self Promotion, I’d like to announce that I’ve been invited to speak at Savour Australia 2013, Australia’s first global wine gathering, which will happen in Adelaide in mid-September.

You can learn about Savour Australia 2013 by clicking here or watching the video above. The purpose of the program, as I understand it, is to re-launch Brand Australia onto the global wine markets — to replace the down-market Yellow Tail sort of image that evolved over the last dozen years with an up-beat, up-market narrative that connects Australian wine with its regions, food, culture, people, and links it all to wine tourism, which is the best way to have the complete experience.

I think the message is exactly the right one for Australia today and I am looking forward to being part in the discussion.

Here is Your Chance to Tell Me Where to Go!

Sue and I will be staying in Australia for a couple of weeks after Savour Australia 2013. Where should go and who should we visit? If you have suggestions please leave a comment below or email us at Mike@WineEconomist.com.

When Oz Clarke spoke at the Wines of Chile Awards seminar earlier this year, his theme was simple and clear: Chilean wine is at a crossroads and it was up to the people in that room to decide which direction to go. Would they make the same mistakes as winemakers in Australia, for example, or choose another path? Oz, who was a stage and film actor in a previous life, is a dramatic speaker, but if you watch the video I think you will agree with me that his message is even more powerful than the delivery.

The carefully devised Plan projects an average annual growth rate of 9.2% and is based on strengthening the recognition and appreciation of “Wines of Chile” as a world-class appellation, which will in turn increase the average price, sales, and added value for all Chilean wine industry stakeholders, including small and large growers, suppliers, wineries, and exporters.

The plan focuses on four messages to drive the transformation:

Diversity and Quality. Chile has much to offer with respect to quality, diversity, and wines that over-deliver at every price point.

Sustainability. Sustainable Chile: Clean, efficient, and responsible.

Country Image. Chile is good for you.

Innovation. Chile: Moving above and beyond.

The plan’s ten year time horizon speaks to the sense of “Chile at the Crossroads” immediacy while the four “strategic pillars” indicate how much needs to be done in terms of recasting Chile’s image. Chile’s reputation as a producer of bargain Cabernet Sauvignon, Chardonnay and Sauvignon Blanc needs to be reshaped in terms of both wine types and price points. And the image of Chile itself must be updated or redefined, according to the plan’s analysis, so that the country sells the wine (as Italy’s image obvious does for Italian wine) and not the other way around. (Whether a campaign built around the slogan “Chile is Good For You” can accomplish this is debatable.)

Audacious Goals?

Exports are key for Chile since domestic consumers drink up only about 30% of total production. The idea that revenues might grow by 9.2% in the next decade is not as ridiculous as it might sound, given the current economic climate, although it is certainly an audacious goal.

Chile’s wine exports grew by a yearly average of 33% in the 1990s (according to data in the Wines of Chile report) and by 11% per year between 2000-2009. But whereas growth came through both increased price (7%) and quantity (25%) in the 1990s, the 11% revenue growth in the 2000s was due to volume growth (12%) offsetting 0.1% average price declines. The new strategic plan calls for a radical change, with rising price not higher production driving revenue growth. Good idea, but easier said than done.

So (and this is the “crossroads” theme again), Chile needs to turn things around in a fundamental sense and this may be difficult in today’s market environment as an excellent interview with with Rabobank’s Stephen Rannekleiv in a special September 2011 Chile Report issue of The Drinks Business makes clear. Rannekleiv is an optimist about Chile’s wines, but very cautious about its wine industry’s ability to meet the 2020 goal.

Something Completely Different

Rannekleiv suggests that Chile seek out new markets to supplement but not replace the UK, its largest export market today, where margins currently are thin or even negative and where upward price adjustment is extremely difficult. Focus must be on price and quality, Rannekleiv notes, so major supply surges must be avoided.

It is very difficult to raise price (without dramatic loss of market share) for existing product lines in today’s market, so “Chile needs to find something different, such as marketing around new varieties that are exceptional; it also needs to continually work on improving quality.”

There is no silver bullet, Rannekleiv suggests. It will take a combination of controlled output growth, continuing quality improvements, image development and new products and markets to turn the Chilean wine industry onto the right path.

Getting the Message Out

One element of the Wines of Chile strategy is a series of blogger wine tastings that are designed to educate, inform and persuade social media representatives and their audiences of Chile’s new direction. I took part in one of these programs last year that featured Chilean Syrah and Pinot Noir, stressing the diversity of Chilean wine.

This certainly is part of the 2020 strategy’s message (and the wines told that story pretty well), but Syrah is a problematic market these days and while Pinot is popular, it is hard to break in except at the bulk level. (Although both Chile and Argentina produce Pinot Noir, for example, neither country made the cut for inclusion in Benjamin Lewin’s recent book In Search of Pinot Noir.)

Is Carmenere The Key?

Which brings us to Carmenere, the focus of the most recent blogger tasting program. Is Carmenere the key (or one of them) to Chile’s crossroads dilemma? Carmenere is (like Malbec) a Bordeaux variety that is now better known in the New World than the Old. Can Carmenere be to Chile what Malbec has become for Argentina, a signature variety that creates a new market and that serves as a brand ambassador for the entire country?

A Carmenere boom would tick a lot of the Wines of Chile 2020 plan boxes. Is Carmenere the key? Come back next week for my answer.

Some of the increase probably comes as consumers switch over from White Zin, as the article’s headline suggests. The decline in White Zinfandel sales is accelerating as measured by Nielsen, with a 7.4 percent decrease in the most recent month reported in the same issue of WBM. Since White Zin sales are huge (almost double the sales of Red Zinfandel, for example, and slightly larger than Sauvignon Blanc in the Nielsen rankings), it wouldn’t take many consumers switching from White Zin to Moscato to generate big growth numbers.

Wineries have been quick to respond to the trend. Sutter Home, the White Zin king, has a popular Moscato Alexandria. Robert Mondavi Woodbridge and Gallo’s Barefoot Cellars are in the market, too, and yesterday I saw an advertisement for a Moscato from Columbia Crest. Now that I have started to pay attention, I am seeing Moscato everywhere.

I associate Moscato with low-alcohol fizzy Moscato D’Asti wines from Italy, but Zimmerman points out that Moscato can be made in a variety of sparkling and still styles, which she sees as a plus. The fact that the wines do not typically cost an arm and a leg is an advantage, too. I will be interested to see to what extent Italian producers will benefit from the Moscato boom or if American wineries will capture much of the market growth.

TNBT Effect

Now to be honest, I don’t really care if Moscato becomes The Next Big Thing — I’m more interested in TNBT wine phenomenon itself. Many of the winemakers and winery executives I talk with around the world display an understandable fascination with TNBT. White Zin, which once defined TNBT here in the United States, shows that fads and trends can at least sometimes develop staying power, as the huge sales figures make clear. But TNBT of today cannot afford to get too comfortable — there’s always another NBT on the horizon.

Some of my contacts in Italy worry about Pinot Grigio (PG), for example, which was TNBT for a while and continues to grow in the U.S. market. Nielsen reports sales of Pinot Grigio/Pinot Gris totalled $751 million in the sales vectors they monitor in the 52 weeds ending January 8, 2011 — much higher than White Zin’s $425 million for the same period. The Italians are glad that PG sales are growing, but they worry that their share of this market may be crowded off the shelves by U.S. PG wines (from Sutter Home, Barefoot Cellars, Columbia Crest and Woodbridge, for example).

And, of course, they are concerned that the market will swerve and TNBT will shift in some other direction entirely, leaving behind a smaller market niche.

Is Torrontés TNBT?

So when I was getting ready to visit the wine country in Argentina I found two groups interested in the question, is Torrontés TNGT? — the hopeful Argentinean producers and fearful makers of Pinot Grigio back in Italy!

Torrontés is an interesting candidate for TNBT. Some people see it as Argentina’s signature white grape variety, ready to take its place along side Malbec in the market place. While Malbec has its roots in France (it is one of the classic Bordeaux blend varieties), Argentinean Torrontés is thought to be theirs alone — a cross between Muscat (think Moscato) and the Criolla or Mission grapes planted by the early settlers. It is or can be intensely aromatic and some of the wines I’ve tasted (the Doña Paula, for example) seem to be all about flowers more than fruit or minerals. Distinctive, but everyone’s cup of tea.

Having read so much here in the U.S. about the amazing TNBT potential of Torrontés, I was a bit surprised at the reactions I found in Argentina. Some of the wine people we talked with were clearly enthusiastic and ready to ride the wave if and when it came, but others had doubts.

The optimists view Torrontés as the next wave of distinctive “Blue Ocean” Argentinean wines. Malbec paved the way, then Torrontés broadens the market, then Bonarda and so on each filling a unique market niche.

More than one person talked about the potential for Torrontés in Asia, pointing out how well it pairs with Asia food. Of course everyone in the world who makes white wine with good acidity dreams about selling their wines in Asia, so this is hardly an uncontested market. And it is also useful to remember that while you and I might like the taste of Torrontés (or Alsatian Pinot Gris) with Pad Thai or Kung Pao Chicken, most Asian consumers believe that wine should be red and that it is not necessarily meant to be consumed at meals. So caution is warranted.

Parallel (and Ambiguous) Universes

I was surprised at the number of wine people who were Torrontés sceptics. Some were concerned that Torrontés lacks the quality to be an important grape varietal. They would rather focus on quality international varietals like Chardonnay and Cabernet Sauvignon, to complete directly based on quality and price rather than trying to develop a new but possibly marginal market segment.

Torrontés is like Pinot Grigio, only it’s good, one expert told us with a grin — and with obvious disdain for both wines. Although Italian Pinot Grigio can be excellent, its reputation is influenced by simple basic products that flood the market and I think there is concern that this could happen with Torrontés in Argentina.

The parallels with Italian Pinot Grigio are interesting. The best of the Torrontés and Pinot Grigiot wines come from particular geographic areas (Salta in Argentina, for example, and Alto Adige in Italy), but expanded production would probably come from other zones where the quality is not as high. As TNBT effect strikes, if it does, the initial quality could be undermined as output expands. The concern is that Argentina is not as established as Italy in world wine markets and its reputation might not be able to withstand a wave of mediocre wines.

But perhaps it is the nature of TNBT phenomenon that hot products simultaneously exist on many levels, simple and complex, highest quality and no-so-good. Perhaps that is the key to their success. Maybe it is the diversity (or is it ambiguity?) that allows fads or trends to evolve into TNBT.

Although wine snobs almost universally reject White Zinfandel, for example, some good wines of this type have been made, including an early vintage by Ridge Vineyards that I talk about in Wine Wars.

Sometimes I feel like a broken record when I write about the Australian wine industry: bad news, bad news, bad news.

Most recently the bad news was the Dutch Disease. Australia’s mineral export success has driven up the foreign exchange value of the Australian dollar, making imports cheaper and exports (including wine exports) more expensive abroad.

That’s just what the shell-shocked Australian wine industry needs — higher prices or slimmer margins in key export markets! But now the bad news is even worse — the strong Aussie dollar is driving down wine prices in Australia’s domestic market and slashing producer margins there, too. How? Through “parallel import” programs that crafty retailers have put into effect. An article from the Sydney Morning Herald explains the situation.

Caution: Economics Content

Parallel imports are a consequence of a very common practice called international price discrimination. Price discrimination is the business strategy of charging different prices to different customers for similar or even identical products. Different buyers have different ability to pay and price sensitivity and it is sometimes possible to charge some customers a high price and others a low price in an attempt to extract all possible revenue from the market demand curve.

Classic examples of price discrimination include the highly complex pricing system that airlines typically employ with some seats being sold for four or five times the cheapest fare depending on when and how the ticket is purchased. Student and senior citizen discounts are relatively benign and generally accepted price discrimination examples.

International price discrimination is the practice of selling similar goods at different prices in different countries based on local demand conditions. In the case of Australian wine, for example, it appears that local wine market conditions in Brazil or Malaysia might cause winemakers to want to sell products there at lower prices than in the more mature domestic market. If the prices are set correctly, the combination of lower prices in some markets and higher prices in others can maximize the winemaker’s profit.

The Key to Price Discrimination

The key to price discrimination, according to your Econ 101 professor, is to prevent resale. The whole strategy backfires if someone finds a way to buy your products in the low price market and resell them (undercutting your sales) in the high price market. This fact limits price discrimination to situations where resale is costly, difficult or just plain impossible.

If someone finds a way to sell your discounted product back to the home market, the logic of price discrimination explodes.

Now the “parallel import” problem in Australia is that some large retailers there have discovered stocks of lower-priced Australian wines in other countries and are importing them back into Australia to sell for less. The strength of the Australian dollar (Dutch Disease again) makes this even more profitable. The Herald reports that

Parallel importing is … hurting business as supermarket chains and some of the bigger independent bottleshop chains bypass Australian brand licensees and import from third parties in countries including Brazil, Malaysia and the US.

Parallel importing hit record levels in the past year as the dollar continued to strengthen and retailers, looking for ways to drive prices down and exert control over their suppliers, became more aggressive in importing.

Some Australian producers are thus getting a double squeeze in their home market. They are exporting wine at the slimmest of margins (because of lower foreign market prices and the strong Australian dollar’s impact) only to see the wine shipped right back and sold by local retailers, undercutting their plans for higher margin home market sales.

Why do they call these “parallel imports?” I imagine it is because the imports and exports form two parallel lines, with cargo ships full of outbound and inbound wine containers crossing mid-ocean. Australian wine producers need to cross their fingers that even more bad news is not in the cards.

>>><<<

Special thanks to my Australian informant “Crocodile Chuck” for tipping me off to this situation.

I thought it would be interesting to take a look at what’s “big” in the wine market (where the most consumer dollars are going) versus what’s “hot” (or “hot hot hot” as in the video above), showing the fastest growth. I’m using U.S. off-premises wine sales data from Nielsen for the 52 weeks ending 9/18/2010 taken from the December 2010 issue of Wine Business Monthly.

Baseline information: Off-premises wine sales in the U.S. totaled $9,172 million in the period covered here according to the Nielsen report, with an overall growth rate of 3.2%.

Which product categories are the largest in absolute terms and which are growing the fastest? I’m going to break down the data by wine varietal, country of origin (for imported wines) and price category. Take a minute and write down what wines/countries/price points you think will be at the top in each category and see if you’re right. Here goes

Chardonnay Leads the Way

Forget what you thought you knew about Chardonnay being so yesterday and Pinot Noir kicking Merlot’s butt. In terms of the overall retail market sales, the giants (or are they dinosaurs?) still dominate.

BIG varietals

Varietal

$ million

Chardonnay

$1,996

Cabernet Sauvignon

$1,347

Merlot

$911

Pinot Gris/Grigio

$734

Pinot Noir

$526

White Zinfandel

$427

–

American wine drinkers are nothing if not traditional, reaching again and again for familiar varietals, so the usual suspects come top of the table. Pinot Noir has indeed surged in the post-Sideways era, but its lead over wounded White Zin is not large and it still lags far behind arch nemesis Merlot.

Obvious Chardonnay is the consumer default with a 50% lead on Cabernet and double the sales of Merlot. Pinot Grigio, the #2 white varietal, lags far behind.

I find the varietal “hot list” below quite interesting. The fastest growing wine varietals are Riesling, Pinot Noir (of course), Sangiovese and Sauvignon Blanc. (Interestingly, varietal Sangiovese is rising while Chianti is a shrinking category in the Nielsen league table.)

HOT varietals

Varietal

Increase

Riesling

9.4%

Pinot Noir

8.9%

Sangiovese

8.7%

Sauvignon Blanc

8.5%

-

It seems to me that while the “big” varietals are wines that many consumers purchase to drink on their own (because of their high alcohol levels and for other reasons), the “hot varietals” are a bit more likely to be food wines. I wonder if that’s a trend?

World Wine Web

Most of the table wines that Americans drink are American — there is a very strong home country preference. Domestic wine sales totaled $6,524 million for the period covered here while imports accounted for $2,648 million. What countries supply the most imported wine as measured by total expenditures? Here’s the Big list:

BIG import countries

Country of Origin

$ million

Italy

$804

Australia

$771

Chile

$243

France

$228

Argentina

$187

New Zealand

$125

–

As the table shows, Italy and Australia are #1 and #2 respectively in off-premises sales. It is interesting that France has fallen to #4 behind Chile. Argentina and New Zealand make the cut here (Spain did not!) as you might expect, but bear in mind that Italy still sells more wine in the U.S. than Chile, France, Argentina and the Kiwis combined. The concentration ratio in this market is very high: Italy and Australia may be struggling at the moment, but they are in a league of their own.

Italy and Australia will not be over-taken soon, but the market momentum seems to have has passed. Look at the big growth numbers that Argentina and New Zealand are putting up below! Wow. Annual growth rates of more than 20%!

HOT import countries

Country of Origin

Increase

Argentina

27.6%

New Zealand

21.1%

Germany

4.4%

Chile

1.7%

Spain

0.6%

Portugal

0.3%

-

Now look at the gap between the really hot ones and the rest! Germany comes in at #3 on hot list, but with a low 4.4% increase for the year. Sales of most wine imports (including Italy and Australia) have actually fallen in the last year. Spain and Portugal squeeze onto the list at #5 and #6 by simply avoiding utter collapse. The import wine segment is slumping badly, with Argentina and New Zealand the only significant exceptions.

The Price is Right

Finally, let’s look at the market in terms of price points. What are the biggest and hottest parts of the wine wall in terms of price?

BIG price points

Price Segment

$ million

$3.00 – $5.99

$2,688

$6.00 – $8.99

$1,903

$9.00 – $11.99

$1,868

$12.00 – $14.99

$910

$0 – $2.99

$794

$15.00 – $19.99

$557

$20+

$446

–

You can see from the data why Gallo is having a good year (or probably having a good year, since they are a private company and don’t release data so I can only guess). Their brand portfolio is aimed at the heart of the market, from $3.00 to $11.99. Lots of good targets there!

You can also see why Constellation Brands is probably finding this a challenging year. They reconfigured their brand portfolio to take advantage of what they saw as upmarket opportunities. They moved up the wine wall a bit but the market changed directions and went downmarket, leaving them in a less competitive position.

HOT price points

Price segment

Increase

$9.00 – $11.99

9.1%

$20+

7.4%

$12.00 – $14.99

5.0%

$3.00 – $5.99

4.5%

$15.00 – $19.99

2.5%

$0 – $2.99

(0.1)%

$6.00 – $8.99

(4.0)%

–

But Constellation’s upmarket bet may yet pay off. The hot price segments are all in the wine wall’s upper strata.

The Old Elasticity Trap

The rise in spending in the super-premium + categories is an encouraging sign, but I think some caution is necessary in interpreting the data. Many observers see the big increase in expenditures on $20+ wines and conclude that consumers are coming back to this segment strongly — that the demand curve has shifted. But I suspect that there is a lot of bargain hunting taking place and that margins are falling – bad news. Maybe we are just following discounted prices down the demand curve.

For many of today’s buyers a $20+ retail wine is a highly discretionary purchase and so the demand curve may be quite elastic. Econ 101 students will remember that total expenditure increases when price falls for a product with an elastic demand.

The large percentage expenditure increases we seen in the data could result from discounting — $30 wines being sold off for $25 and so on — rather than an actual increase in demand or shift in the demand curve. The increased revenues are good and inspire optimism, but they may disguise the bad news of shrinking margins.

(As I am writing this, the neighborhood Safeway is offering an extra 20% off any wine selling for $20 or more. I suspect sales revenue will increase at the lower retail markup.)

Overall conclusions? I’d rather not, thanks. These data are interesting more for the questions they raise than the answers they provide. But the questions about how the U.S. wine market is changing are worth pondering (hopefully over a nice glass of wine). Cheers.

Post navigation

The Wine Economist

What would you get if you crossed the Wine Spectator, America's best-selling wine magazine, with the Economist, the world's leading business weekly? The answer is this blog, The Wine Economist, which analyzes and interprets today's global wine markets. Staff: Mike Veseth (editor-in-chief) & Sue Veseth (contributing editor).